Question

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Budgeted Unit Sales Quarter 1 46,000 Quarter 2 72,000 Quarter 3 36,000 Quarter 4 72,000 • Each T-shirt is expected to sell for $21. • The purchasing manager buys the T-shirts for $8 each. • The company needs to have enough T-shirts on hand at the end of each quarter to fill 31 percent of the next quarter's sales demand. • Selling and administrative expenses are budgeted at $92,000 per quarter plus 20 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased 3. Determine budgeted cost of good sold for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Goods Sold

Answer 1

Solutions:

D Red Canyon T-shirt Company Sales Budget 4 5 6 Particulars Quarter 1 Quarter 3 Quarter 2 Budgeted Unit sales Selling Price per unit Budgeted Sales revenue 46000 7 72000 36000 $21.00 $21.00 $21.00 8 $1,512,000 $966,000 $756,000 9 10 11 12 Red Canyon T-shirt Company 13 14 Budgeted cost of merchandise purchases 15 Particulars Quarter 2 Quarter 3 Quarter 1 Budgeted unit sales Add: Required ending Inventory (20% of next quarter's sales) Total Needs Less: Opening Inventory Required Purchases in units Cost per unit of T-shirt Budgeted cost of merchandise purchases 16 46000 72000 36000 17 11160 22320 22320 58320 68320 18 83160 14260 19 22320 11160 54060 47160 20 60840 $8.00 $8.00 $8.00 21 $432,480 $486,720 $377,280 22 23 24 25 Red Canyon T-shirt Company 26 Budgeted Cost of goods sold 27 Particulars Quarter 1 Quarter 2 Quarter 3 Budgeted Unit sales Cost per unit Budgeted Cost of goods sold 28 46000 72000 36000 $8.00 $8.00 $8.00 29 $576,000 $368,000 $288,000 30 31 Red Canyon T-shirt Company Budgeted Selling and administrative expenses 32 33 34 Particulars Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue $966,000 $1,512,000 $756,000 35 36 Variable Selling and administrative expense (20%) Fixed Selling and administrative expense Budgeted Selling and administrative expenses $193,200 $302,400 $151,200 37 $92,000 $92,000 $92,000 38 $285,200 $394,400 $243,200 39 40 41 42 Red Canyon T-shirt Company 43 Budgeted Income Statement Particulars 44 Quarter 3 Quarter 1 Quarter 2 Budgeted Sales Revenue Less: Cost of goods sold Budgeted gross Margin Less: Budgeted Selling and administrative expenses $966,000 $1,512,000 $756,000 45 $368,000 $576,000 $288,000 46 $468,000 $598,000 $285,200 $936,000 47 $394,400 $243,200 48 49 $224,800 $541,600 Budgeted Net operating income $312,800 50 51 756 (4) Sheet156 (23) Sheet937 Sheet939 Sheet940